The trend in the Interbank Money Market remained the
same with short term rates available at lower side of the yield curve.
Overnight funds initially changed hands at the rock bottom levels with
trades evident between 0.50% and 1.00%. This week SBP conducted OMO to
stabilize the market and mopped up total amount of Rs.8.90 bln from the
system in 4 and 8 weeks at the cut off yield of 4.25% and 5.00%
respectively. The outflow was not significant and have no impact on
overnight rates, which continue to remain at the same levels. However,
it was on Friday, the last day of the week that rates rose sharply with
overnight activity initially at 1.50% but soon jumping into the higher
side with trades as high as 8.00%.

Brisk activity continued in term market and majority
of activity took place in the call market. Three months trades were
witnessed as low as 4.25% while six months, tenors traded as low as
5.10%. Meanwhile, one month repo and call offers fell to 4.00% to 4.25%
respectively with trades been reported in both at 3.90% and 4.00%.
Trades were also conducted for six months T-bills maturity in July at
5.00%. Interest in PIB was prevalent in the market with buyers willing
to bid at Rs.105.85 for 28th July 3 years issue and offers were
available at Rs.106.5290. Bid and offers for 5 years PIB latest issue
was quoted in the range of Rs.105.50 and Rs.106.10. The rise in the PIB
prices was generally due to the eased interbank money market and mainly
because of the cut in discount rate.

No major change in the market scenario is expected in
the days to come and we feel that term rates in the market will remained
at the prevailing levels. Aggressive participation is expected in next
T-bills auction and foresee further downward adjustment of rates in all
tenors.